Article

Note: In connection with the settlement of an Estate, an auction was held for four parcels of commercial land which were to be awarded to "the highest bidder for cash". Two bids were received, one from one of the heirs in the amount of US$72,000 and another from the attorney who had represented the other three heirs in the amount of $60,000. The higher bid was accompanied by what the opinion describes as a "letter of guarantee" in the amount of US$72,000 issued by BancorpSouth in favor of the Special Master in the Estate Proceedings and the lower bid was accompanied by "an uncertified trust account check from [attorney's] law firm".

The letter of guarantee provided in part that:

Our customer, [Name of Fourth Heir], has requested this letter of guarantee from BancorpSouth in order to support her bid for the above referenced auction. The bid is not to exceed $72,000 and we guarantee that the good funds will be made available upon receiving clear title to the above referenced parcels.

The Special Master handling the estate disallowed the higher bid, finding that "the letter of guarantee ... was 'not for cash'". The sale then was made to the other bidder and the motion of the other heirs for summary confirmation of the sale by the Ninth Chancery Court District, Willard, J., was granted. On appeal by the higher bidder, the Supreme Court of Mississippi, in an opinion by Carlson, J., reversed and remanded.

The highest bidder argued that the letter accompanying the bid was a letter of credit within the meaning of Rev. UCC Article 5 and that it was no less cash than an uncertified trust check in that "upon receipt of the deed, the bank would have been required to pay up to $72,000." The appellate court agreed, noting that "[h]ad the special master accepted the letter and delivered the clear title, BancorpSouth would have been required to make payment in an amount up to $72,000". The appellate court distinguished a case cited by the other heirs on the grounds that the promise embodied in it was not a letter of credit but a promise to extend credit to a borrower.

Comment: The court accepts the argument that the "guarantee" was an LC but provides no insight in the opinion into the basis for its decision other than the quoted text.

[JEB/tas]

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